Perhaps the biggest problem associated with curbing the use of expensive federal mandates is the difficulty
in preparing cost estimates for decision makers in Washington. The 1981 Local
Government Cost Estimate Act attempted to alleviate this problem by requiring
the Congressional Budget Office (CBO) to forecast estimated costs for all
legislation containing mandates exceeding $200 million. The purpose of this act
was to heighten the awareness of legislators as to the cost of each new bill.
Unfortunately, the difficulty of tracking legislation that contains mandates
makes accurate fiscal impact estimations a challenging assignment.

Authors of several papers have attempted to describe all the variables that must
be taken into account when deciphering the impact of federal mandates. A handful
of the most important examples are listed below.

Fiscal impact studies are not performed by the CBO until after the bill leaves
full committee.

The CBO employees are often required to calculate cost estimates in a time period of
3-5 days, thus making it difficult to gather pertinent data for accurate cost
estimations.

Many bills preclude the use of standard estimating techniques.

A lack of accurate data sources exist that CBO analysts could readily draw
information from for use in their estimates.

Regulations for the implementation of bills are often not written for up to two
years after the law is passed.

The language used in drafting legislation is often ambiguous. The CBO therefore has
no way to calculate exactly what the impact of final regulations will be.

Currently, cost estimates are not made on amendments to legislation or tax and
appropriation bills containing mandates. Therefore, the aggregate cost of
unfunded mandates to the states is underestimated.

The number of lower level governments affected increases the difficulty in
estimating costs. This is best illustrated by the effects of the Fair Standards
Act which was, according to Theresa Gullo as quoted in Coping with Mandates,
applicable to "7 million public employees in 50 states and approximately
3,000 counties, 19,000 municipalities, 17,0P0 townships, 15,000 school
districts, and 29,000 local special districts."[8] This is from just one piece of
legislation! When estimating units like the CBO are required to calculate such
costs, in a limited period of time, with a real shortage of accurate data, it is
likely that the true cost of mandated legislation will be grossly
underestimated.

Federal policy debates usually concern only the federal costs of legislation,
not the impact of legislation on state and local government.

Compounding the problem is that there is no established, systematic way of
tracking the fiscal impact of mandates once they have been placed into law. When
such a serious lack of data exists, it is difficult for state and local
officials, special interest groups, and the general public to react effectively
to the increased burdens imposed by the federal government.

Nonetheless, the issue of mandates has prompted people in many of the 50 states
to investigate the costs and the burden those costs are imposing on state
budgets. One of the authors of this report (LaFaive) worked with officials
within three departments of Michigan state government in an effort to do just
that with a specific focus on unfunded mandates in the Medicaid program.
Medicaid is the principal public sector health care program for the poor and is
jointly funded by state and federal governments. As the following section
indicates, the magnitude of mandate costs to Michigan in this single area is
staggering.